The determination that a representation in an advertisement is misleading can be difficult, particularly given that advertisers often use disclaimers to clarify any confusing or unclear aspect of advertisements. Whether or not these disclaimers are sufficient to overcome any misleading aspect of the advertisement has been unclear. Two recent decisions have provided assistance in clarifying the test for determining if a representation is misleading, and when disclaimers are sufficient to overcome a misleading representation claim.

Materiality. In The Commissioner of Competition v Yellow Page Marketing BV, 2012 ONSC 927, the Ontario Court was responsible for interpreting s. 74 of the Competition Act and the effect of disclaimer language on misleading claims. The respondents, who operated internet directory websites and were in no way related to the Yellow Pages Group, designed websites displaying features similar to the Yellow Pages Business Directories including the use of the words “Yellow Page”. The respondents began sending unsolicited faxes to Canadians which contained the Yellow Pages Group’s “walking fingers” logo and the words “Yellow Page”. The faxes also contained fine print indicating that by returning the faxes, the recipient would be bound by a two year contract. Those responding to the faxes were then issued invoices which contained designs similar to those sent by the Yellow Pages Group to those who advertised in the Yellow Pages Business Directories. A number of complaints were filed by Canadians. Most of the complainants believed that the representations were made by the Yellow Pages Group and did not understand the fine print.

In its analysis of s. 74.01, the Court noted that:

A representation is “misleading in a material respect” where an “ordinary citizen would likely be influenced by that impression in deciding whether or not he would purchase the product being offered.” A misleading representation is material where it is of “much consequence or [is] important or pertinent or germane or essential to the matter” (para. 34)

The Court found that the faxes were designed to create the impression that the recipient was being requested to update information for his/her existing Yellow Pages listing, and that many recipients believed that the faxes had been sent by Yellow Pages Group. Further, the Court noted that the false or misleading representations made by the respondents were material in that they were intended to deceive, and did deceive, many Canadians into believing that they were dealing with the Yellow Pages Group. Materiality was further evidenced by the fact that the majority of the complainants indicated that they would not have returned the faxes had they known that the respondents were unaffiliated with the Yellow Pages Group.

The Court also analyzed the respondents’ use of disclaimers and noted that the fine print did not reduce the false or misleading nature of the representations. In particular, the fine print did not clarify that the unsolicited faxes had not been sent by the Yellow Pages Group and the disclosure was insufficiently prominent.

The Court ultimately granted several remedies requested by the Commissioner including administrative monetary penalties against the respondents in the amount of $8 million dollars, as well as administrative monetary penalties of $500,000 against two individual respondents.

In a second decision, Richard v Time Inc, 2012 SCC 8, the Supreme Court of Canada was tasked with addressing the test to be applied to determine what constitutes a false or misleading representation pursuant to the Quebec Consumer Protection Act. While the case did not involve an interpretation of the misleading representation provisions under the Competition Act, the Supreme Court addressed the issues of "general impression" and "average consumer". As such, the case will likely provide guidance in the context of Competition Act proceedings.

The “general impression” on the “average consumer”. In the Richard decision, the plaintiff Jean-Marc Richard received a document in the mail entitled “Official Sweepstakes notification” which stated in large bold print: “Our sweepstakes results are now final: Mr. Jean Marc Richard has won a cash prize of $833,337.00!” This sentence was followed by a clause in smaller print that indicated: “If you have and return the Grand Prize winning entry in time and correctly answer a skill-testing question, we will officially announce that,” followed by, in large bold print: “OUR SWEEPSTAKES RESULTS ARE NOW FINAL: MR. JEAN MARC RICHARD HAS WON A CASH PRIZE OF $833,337.00!” This same writing technique was used elsewhere in the letter.

Mr. Richard filled out the entry form thereby subscribing to Time magazine for a period of two years. When Mr. Richard did not receive the cash prize, he contacted the respondent and was then informed that the letter was merely an invitation to participate in a sweepstakes, and the respondent refused to award the prize. Mr. Richard brought an action against Time for breach of contract and for violating the Consumer Protection Act. At trial, Mr. Richard was awarded $1,000 in general damages and $100,000 in punitive damages. However, the Quebec Court of Appeal reversed the decision.

In determining whether Time made a false or misleading representation, two factors provided in the Consumer Protection Act had to be considered by the Supreme Court, namely: (i) the "general impression" given by a representation and (ii) "the literal meaning" of the words it contains. In regard to "literal meaning," the Court held that "the meaning given to words used in a representation [must] be the same as their meanings in everyday life" so as to avoid defences based on convoluted, subtle or technical meanings of the words used. In regard to the "general impression" given by the representation, the Court noted that a representation must be considered in its entirety and "analysed in the abstract, that is, without considering the personal attributes of the consumer who has instituted the proceedings." Also, the "general impression" should consider the representation's layout, and the general impression is not "formed as a result of a rushed or partial reading".

The Court also held it necessary to determine from whose perspective the general impression should be assessed and concluded that the standard of the "average consumer" to be applied in such a context is that of the "credulous and inexperienced" consumer, albeit one capable of understanding the literal meaning of the words used in any given representation.

In its defence, Time relied heavily on the small print used in the mail-out. The Court noted that despite all the conditions laid down in the document, Time used tricks in writing and laying out of text and overall the document conveyed the general impression that Mr. Richard won the grand prize. Interestingly, the Court found that the mail-out did not necessarily contain any statements that were actually false.

Time’s letter was ultimately held to be misleading so as to leave the general impression that the appellant had won the sweepstakes and, as such, was in contravention of the Consumer Protection Act. Mr. Richard was awarded $1,000 for moral injuries and $100,000 in punitive damages.

Additional fees cannot be hidden in fine print. Another noteworthy case which settled last year involved Bell Canada. In that case, Bell advertised prices that were not in fact available because additional mandatory fees such as modem rental and digital television services were hidden in fine print disclaimers. For example, Bell’s website offered a bundle for home phone, internet and television services as low as $69.90 per month. However, it was not possible for customers to buy the package for that price, but rather the lowest price possible for the package was $80.27. In June 2011, the Competition Bureau announced that Bell Canada agreed to stop making misleading representations about prices offered for its services. Bell was required to pay an administrative monetary penalty of $10 million as a result of the terms of a consent agreement. The Commissioner of Competition released a statement indicating that “[w]hen a price is offered to consumers, it must be accurate. Including a fine print disclaimer is no license to advertise prices that are not available.”

Conclusion. As a result of these cases, the following principles appear to have been established with respect to misleading representations:

  • Fine print language will not be sufficient to overcome a misleading representation if it is not sufficiently prominent.
  • A statement does not need to be factually false to be considered a misleading representation if the overall general impression of the representation is misleading.
  • Whether a representation is misleading is to be assessed from the perspective of the “average consumer” or “ordinary citizen”. This fictional character is an inexperienced consumer, but one capable of understanding the literal meaning of words.
  • A misleading representation is material when it is considered “important” to the matter. In determining whether the representation is material, the court will be influenced by the beliefs and actions of the customers exposed to the misleading representation.
  • If a statement is false, as opposed to misleading, a disclaimer cannot be used to correct the false statement.